NAURA Technology Group's Second-Quarter Profit Meets Expectations, with High-End Equipment Expansion Supporting the Full-Year Growth Outlook

Overview

The report evaluates NAURA Technology Group's second-quarter 2026 results, visibility into full-year growth, and progress in high-end equipment. UBS believes that the revenue shortfall primarily reflects the pace of recognition rather than deterioration in order or demand trends; net profit met expectations, cost control improved profitability, and new product validation and volume deliveries continued to broaden the company's coverage of advanced processes and advanced packaging.

Core views

NAURA Technology Group's second-quarter 2026 revenue increased 24% year over year and declined 4.7% quarter over quarter, coming in 9% below UBS expectations. The report believes that the variance was mainly due to the timing of order revenue recognition and had limited impact on the full-year revenue outlook. Second-quarter net profit attributable to shareholders was RMB1.735 billion, up 6.6% year over year and 6.2% quarter over quarter, in line with UBS expectations, indicating that profit performance was more resilient than the short-term volatility in revenue. Second-quarter revenue declined 4.7% quarter over quarter, underperforming the approximately 48% average sequential growth of AMEC, ACM Research Shanghai, and Piotech, but UBS emphasized the difference in comparison bases: NAURA Technology Group's first-quarter revenue declined 14% quarter over quarter, significantly better than the average 32% decline of the domestic peers mentioned above, resulting in a higher base for the second quarter. Given that revenue recognition cycles for domestic semiconductor equipment are typically around 12 months, UBS believes that the recognition pace in a single quarter is insufficient to alter the full-year trend and forecasts 32% year-over-year revenue growth in 2026. Leading indicators of downstream demand and industry surveys both show continued marginal improvement, further supporting this assessment. In terms of profitability, second-quarter consolidated gross margin declined 1.5 percentage points quarter over quarter to 39.3%, mainly due to changes in the product mix and commercial discounts offered to certain major customers. The report notes that the gross margin of the semiconductor equipment business is generally significantly higher than that of the electronic industrial equipment business, with the relevant gross margin at 39.75% in the first half of 2026; based on this, UBS estimates that NAURA Technology Group's second-quarter semiconductor equipment gross margin remained superior to that of most domestic peers. Meanwhile, second-quarter EBIT margin and recurring net margin improved by 1.0 and 1.8 percentage points, respectively, from the first quarter, mainly due to stronger cost control, indicating that improved operating efficiency offset some of the gross-margin pressure. Products and market share constitute another core theme of the report. NAURA Technology Group continued to expand shipments across key equipment lines such as etching, thin-film deposition, and thermal processing, while steadily increasing penetration in advanced logic, advanced memory, and power semiconductors. The high-end ICP etching equipment launched in the first half of 2026 features angstrom-level etching uniformity and an aspect ratio of several hundred to one, enabling it to meet the requirements of critical processes for advanced logic and high-end memory chips; the equipment has completed customer validation and is being introduced into mass production. In thin-film deposition, the new-generation tubular ALD equipment has achieved volume deliveries to domestic memory manufacturers; high-end TSV electroplating equipment has achieved scaled supply and can meet the requirements of high-end processes for advanced packaging and three-dimensional integration. Orders and deliveries of immersion ion implantation equipment also grew steadily during the reporting period. Regarding its industry position, the report states that NAURA Technology Group is China's largest semiconductor equipment manufacturer by revenue, with coverage spanning ICP etching, PVD, cleaning, and other fields. According to Gartner data cited in the report, the company's wafer fabrication equipment-related revenue was USD2.9 billion in 2024, ranking seventh globally; it also operates vacuum equipment, new energy equipment, advanced packaging equipment, and precision components businesses. UBS forecasts the company's revenue for 2026—2030 at RMB51.830 billion, RMB72.480 billion, RMB95.551 billion, RMB113.377 billion, and RMB127.582 billion, respectively; diluted earnings per share for the same period are forecast at RMB9.36, RMB16.00, RMB23.07, RMB29.20, and RMB34.26, respectively. The RMB800.00 price target is based on 50x 2027E P/E, corresponding to a 1.4x PEG and a 35% compound growth rate in earnings per share from 2027—2029. Based on the price of RMB700.40 on August 25, 2026, UBS forecasts price appreciation of 14.2%, a dividend yield of 0.1%, and a total stock return of 14.4%; the assumed market return is 6.8%, implying a forecast excess return of 7.6%, and UBS maintains its 12-month Buy rating. In its short-term quantitative assessment, UBS assigned scores of 4 to both the industry structure and regulatory environment over the next six months and a score of 4 to changes in the company's condition over the past 3—6 months; it assigned scores of 3 to the risk bias of the next earnings-per-share update relative to market consensus and relative to UBS's own forecasts, indicating expectations of broadly in-line performance versus consensus and relatively balanced upside and downside risks, respectively. Positive catalysts identified for the next three months include a potential further increase in capital expenditure by Chinese memory manufacturers, potential price increases by overseas peers that could improve the domestic pricing and profitability environment, and opportunities for the company to develop overseas wafer-fab customers. Downside risks listed in the report include escalating geopolitical tensions and broader restrictions, weaker-than-expected demand for wafer fabrication equipment in China, and intensified competition leading to market-share losses in etching, deposition, and cleaning businesses. Upside risks include the easing or removal of geopolitical restrictions, stronger-than-expected capital expenditure by Chinese wafer fabs, greater-than-expected domestic market-share gains, and faster-than-expected technological breakthroughs in critical processes such as etching and deposition.

Analysis framework

UBS first compares second-quarter revenue and profit with its own expectations and with year-over-year and quarter-over-quarter performance, then explains the revenue variance using the first-quarter base, domestic peer performance, and the approximately 12-month equipment revenue recognition cycle. The report subsequently breaks down margin changes in terms of product mix, customer discounts, and cost control, and assesses product competitiveness and full-year growth based on equipment shipments, customer validation, volume deliveries, and downstream demand surveys. Finally, it determines the price target using 2027E P/E and PEG and supplements its assessment of the industry environment, earnings surprise risks, and catalysts through a short-term quantitative questionnaire.

Methodology notes

• Valuation MethodP/E and PEG Valuation

  2027E P/E and PEG Valuation

  The report derives its RMB800.00 price target using 50x 2027E P/E and assesses the relationship between valuation and growth using a 1.4x PEG and a 35% compound growth rate in earnings per share from 2027—2029.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Tracking Downstream Wafer Fabrication Equipment Demand and Capital Expenditure

  The report combines leading indicators of downstream demand, industry surveys, capital expenditure by domestic memory manufacturers, and the equipment revenue recognition cycle to assess whether order demand can translate into full-year revenue.

• Quantitative/Factor/Portfolio Theory

  Quantitative Research Review Short-Term Factors Questionnaire

  UBS uses a 1-to-5 scale to assess the industry and regulatory environment over the next six months, company trends over the past 3—6 months, risks surrounding the next earnings update, and catalysts over the next three months; this short-term assessment differs from the report's 12-month stock-rating horizon.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NAURA Technology Group (002371.SZ)

  The report believes the company benefits from improving semiconductor equipment demand in China, domestic substitution of high-end equipment, and rising penetration in advanced processes and advanced packaging.

  Strengths

  China's largest semiconductor equipment manufacturer by revenue, with broad coverage across key equipment lines; high-end ICP etching equipment has entered mass-production introduction, tubular ALD equipment has achieved volume deliveries, high-end TSV electroplating equipment has achieved scaled supply, and cost control has also improved margins.

  Weaknesses

  The quarterly pace of revenue recognition may cause volatility, while changes in the product mix and commercial discounts for major customers exert pressure on the consolidated gross margin.

  Comparison

  Second-quarter revenue declined 4.7% quarter over quarter, underperforming the approximately 48% average growth of major domestic peers; however, NAURA Technology Group's revenue declined only 14% quarter over quarter in the first quarter, better than the peer average decline of 32%, resulting in a higher second-quarter comparison base. UBS estimates that its second-quarter semiconductor equipment gross margin remained superior to that of most domestic peers.

  Risks

  Broader geopolitical restrictions, weaker-than-expected demand for wafer fabrication equipment in China, and intensified competition in etching, deposition, and cleaning leading to market-share losses.

Key data

• Second-Quarter 2026 Revenue Growth+24% year over year, -4.7% quarter over quarter9% below UBS expectations, mainly attributed by the report to the timing of order revenue recognition
• Second-Quarter 2026 Net Profit Attributable to ShareholdersRMB1.735 billion+6.6% year over year, +6.2% quarter over quarter, in line with UBS expectations
• Full-Year 2026 Revenue Growth Forecast+32% year over yearUBS believes downstream demand is improving marginally and the full-year growth outlook remains intact
• Domestic Semiconductor Equipment Revenue Recognition CycleTypically around 12 monthsUsed to explain the difference between the quarterly pace of revenue recognition and the full-year order trend
• Second-Quarter Peer Revenue Growth Quarter over QuarterApproximately +48% on averageAverage for AMEC, ACM Research Shanghai, and Piotech; NAURA Technology Group was -4.7%
• First-Quarter Revenue Performance Quarter over QuarterNAURA Technology Group -14%, peer average -32%NAURA Technology Group performed more strongly in the first quarter, creating a higher comparison base for the second quarter
• Second-Quarter Consolidated Gross Margin39.3%Down 1.5 percentage points quarter over quarter, affected by product mix and customer discounts
• Second-Quarter Margin ImprovementEBIT margin +1.0 percentage points; recurring net margin +1.8 percentage pointsBoth are changes relative to the first quarter of 2026, mainly driven by stronger cost control
• 2026—2030 Revenue ForecastsRMB51.830 billion, RMB72.480 billion, RMB95.551 billion, RMB113.377 billion, RMB127.582 billionCorresponding to 2026E, 2027E, 2028E, 2029E, and 2030E, respectively
• 2026—2030 Diluted Earnings per Share ForecastsRMB9.36, RMB16.00, RMB23.07, RMB29.20, RMB34.26Corresponding to 2026E, 2027E, 2028E, 2029E, and 2030E, respectively
• Price Target Valuation Basis50x 2027E P/E, 1.4x PEGPEG based on a 35% compound growth rate in earnings per share from 2027—2029
• Forecast ReturnsPrice appreciation of 14.2%; dividend yield of 0.1%; total stock return of 14.4%Assumed market return of 6.8%, with a forecast excess return of 7.6%
• 2024 Wafer Fabrication Equipment-Related Revenue and RankingUSD2.9 billion, seventh globallyThe report cites Gartner data

Impact & implications

UBS believes that second-quarter revenue falling below expectations reflects the timing of recognition and a high comparison base rather than weakening full-year demand; net profit meeting expectations and margin improvement driven by cost control reduce the impact of the quarterly decline in gross margin. The transition of high-end etching, ALD, TSV electroplating, and ion implantation equipment from validation to volume deliveries should help broaden the company's coverage of advanced logic, advanced memory, power semiconductors, and advanced packaging, providing the principal basis for maintaining its full-year growth forecast and Buy rating.

Risks

• Geopolitical tensions intensify and related restrictions expand further.
• Demand for wafer fabrication equipment in China is weaker than UBS expects.
• Intensified competition causes the company to lose market share in its etching, deposition, and cleaning businesses.

What to watch

• Monitor whether orders can support UBS's forecast of 32% year-over-year revenue growth in 2026 under the approximately 12-month revenue recognition cycle.
• Monitor whether the marginal improvement indicated by leading indicators of downstream demand and industry surveys can continue.
• Monitor the progress of high-end ICP etching equipment from customer validation to mass production, as well as orders and deliveries of ALD, TSV electroplating, and immersion ion implantation equipment.
• Monitor whether capital expenditure by Chinese memory manufacturers increases further over the next three months.
• Monitor whether overseas peers raise product prices, thereby improving the pricing and profitability environment for domestic equipment.
• Monitor the company's progress in developing overseas wafer-fab customers.